The Medicare-Approved Amount Explained

There’s a lot of terminology for Medicare beneficiaries to learn, and among them is “Medicare-approved amount” or “allowed amount.” What does this term mean?

Medicare predetermines how much it will reimburse health care providers for each covered service or item. These amounts are known as the “Medicare-approved amount,” which is the amount of money that Medicare will pay your doctor or other health care provider for treating you. The Medicare-approved amount may be less than what the provider charges other patients with other types of insurance. 

The Medicare-approved amount applies mostly to services covered by Medicare Part B, which covers outpatient services like doctor’s appointments, and it also covers durable medical equipment (DME) such as wheelchairs and blood sugar test strips. 

An Example of the Medicare-Approved Amount

To use an example, let’s say you fall and injure your wrist. You visit an outpatient health clinic and get examined by a doctor who takes some X-rays. The doctor determines your wrist is sprained and gives you a brace to wear. 

The examination by the doctor might carry a Medicare-approved amount of $100, meaning Medicare will pay the doctor $100 for examining your wrist. The X-rays may have a Medicare-approved amount of $200. And the brace itself might have a Medicare-approved amount of $50. (Note: these costs are hypothetical and are not based on actual Medicare costs for the services or items mentioned.)

Based on the above costs, the health clinic would be allowed by Medicare to charge $350 total for the services and items provided. This might appear on your bill as the allowed amount, while the billed amount might be a lower cost figure that signifies what you must pay for your share of Medicare coinsurance or copays if you’ve already met your Part B deductible for the year. We’ll explain more about that below.

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How the Medicare-Approved Amount Affects Your Medicare Bills

Medicare Part B typically requires a coinsurance payment of 20% of the Medicare-approved amount for covered care after you meet your annual Part B deductible. Using the example above, your 20% coinsurance payment for your visit to the health clinic would likely be $70 (20% of $350).

The higher the Medicare-approved amount, the higher your coinsurance billed amount will likely be. If the Medicare-approved amount for the X-rays in the example above was $250 instead of $200, that would increase the total cost of the visit to $400, which would also increase the cost of your coinsurance payment to $80 (20% of $400). 

When Providers Can Charge More Than the Medicare-Approved Amount  

There are certain times when a health care provider can charge more than the Medicare-approved amount. There are different arrangements that a health care provider can have with Medicare, and each provider will typically fall into one of the following categories. 

Participating provider

A participating provider “accepts Medicare assignment,” meaning they agree to accept the Medicare-approved amount as full payment for their service or item. They bill Medicare using what are called CPT codes. 

Nonparticipating provider 

A nonparticipating provider accepts Medicare insurance, but does not agree to accept the Medicare-approved amount as full payment. These providers reserve the right to charge up to 15% more than the Medicare-approved amount in what is known as an “excess charge.”

Excess charges may be covered by a Medicare Supplement Insurance plan (also called Medigap).

Opt-outs

An opt-out provider is one who has opted out of the Medicare program entirely and does not accept Medicare insurance at all. 

How to Know the Medicare-Approved Amount

Knowing the Medicare-approved amount for a particular service or item can help you determine your coinsurance amount and better budget your care. 

Medicare does not make its Medicare-approved amounts easily accessible, but you may call 1-800-MEDICARE (1-800-633-4227) to inquire about any Medicare-approved amounts. Additionally, you may contact your health care provider to ask whether or not they accept Medicare assignment and to find out how much the Medicare-approved amount will be for a particular service or item.